HP Inc., the version of HP that sells personal computers, tablets and printers, reported strong results this quarter, but behind these results are three key elements.
First, the firm has a relatively stable and experienced executive team. Second, it is very focused on a limited number of segments. And third, it appears to be out-marketing every other firm in its segment. Oh, and it has one huge potential killer product in its 3D printer, which is now shipping to key customers like Rolls Royce. Cars in this class have a high percentage of very unique parts, making them an ideal candidate for a production level 3D printer like HP Inc.’s.
Let’s talk about the pillars that support HP Inc.’s strong financial results.
Stable/Loyal/Experienced Executive Team
From the standpoint of staffing, when HP split into two parts, HPE and HP Inc., it was clear that HP Inc. made out like a bandit in executive staff. Each of the top executives had decades of experience in the industry. In two critical areas, Finance and HR, these people represented some of the best in the industry. Even the CEO, while new to the position, was deeply experienced with personal computers and came to the job very highly regarded.
This creates a foundation of stability and excellence that bleeds down through the organization. Until recently, most of the HP folks I know who left the firm would never even consider going back. There has been a wave of returning HP folks to HP Inc. and they talk about the company as if it were young, vibrant and very different from the HP they left.
Successful companies are often defined by stability, loyalty and experience. This foundational concept was showcased in the financials this week.
Focused Strategy for HP Inc.
A lot of technology companies are suffering as they attempt to pivot to new industries and opportunities while trying to maintain the revenue streams that pay the bills. HP Inc. doesn’t really have this problem at the moment. PCs and Printers was and remains a relatively focused market, and while both segments appear to be in decline, the theoretical causes of the PC decline, tablets and smartphones, are themselves in trouble. Printing is in decline, but the rate is very slow and people don’t like change so they are holding on to printing for some things. And HP continues to innovate here so its supply numbers, while weakening, remain surprisingly strong.
Their printing pivot to 3D printing is now rolling into production and, unlike most composite 3D printers, which turn out prototypes that can’t be used in production, HP Inc.’s printed parts are in many cases usable in final products. This is likely why companies like Rolls Royce are using them. This one line has massive upside potential and while the printers are just ramping out of test runs to production runs, they could be a powerful foundation for growth come 2017.
Marketing at HP Inc.
Marketing is one of those things that makes me wonder how many tech CEOs actually attended business school, or paid attention to the marketing classes while there. Currently, a good chunk of the cause of the technology downturn is a distinct lack of demand generation for the related products. HP Inc. is the counterpoint to this, as it appears to be outspending and out-executing every other company in its segment, and this likely also speaks to why its results were so strong.
What makes HP so unique is that a number of key players have marketing backgrounds that are surprisingly broad. Antonio J. Lucio traces back through PepsiCo and Procter & Gamble, which is surprisingly deep for a tech CMO. Ron Coughlin, who heads Personal Systems, was the CMO for Pepsi and has degrees in marketing.
This likely explains why the firm is out-executing its peers in terms of demand; it not only has one of the strongest CMOs from the standpoint of experience, but the guy running Personal Systems has a very similar background and he controls a good chunk of the marketing budget. Having experience and understanding for marketing in operational roles is something we haven’t really seen since Steve Jobs’ death, and HP Inc.’s results showcase why this is important.
Wrapping Up: Foundations of Success at HP Inc.
There is a foundation for success in a company. It starts with a stable, loyal qualified executive team, followed by a lack of complexity in the business model and the requisite focus. Finally, the company needs adequate marketing skills and resources so that the team not only knows what to do, but can afford to do it. This is all highlighted in HP Inc.’s financial results.
I should add that I watch two people closely who represent the best of what they do: Cathie Lesjak, the CFO, who was known at HP for pretty much being right every time; and Tracy Keogh, the most experienced HR manager I’ve met since the 1970s or when HR was last treated as a true profession, not just a compliance organization.
In the end, HP Inc. is the part of HP I’m no longer worried about, for good reason.
Rob Enderle is President and Principal Analyst of the Enderle Group, a forward-looking emerging technology advisory firm. With over 30 years’ experience in emerging technologies, he has provided regional and global companies with guidance in how to better target customer needs; create new business opportunities; anticipate technology changes; select vendors and products; and present their products in the best possible light. Rob covers the technology industry broadly. Before founding the Enderle Group, Rob was the Senior Research Fellow for Forrester Research and the Giga Information Group, and held senior positions at IBM and ROLM. Follow Rob on Twitter @enderle, on Facebook and on Google+